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Beer slogans to explain the rules of the Economy? March 14, 2007

Posted by Jordi in accounting, corporate governance, insipid, SEC.
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Corporate leaders and their network of elites (former SEC Chairmen and Treasury officials) are gearing up to chip away at the post_Enron regulatory structures. I am agnostic about whether that is a good idea. I did note that the “all star”panels that CNN was falling all over itself to gawk at (like the celebs arriving at the Oscars on teh red carpet) was notably absent of the legislators who passed the law, institutional investors who may favor the corporate governance changes, or any critics of corporate governance.

This passage stood out as an example of the way complex regulatory and economic problems can get boiled down to supposedly “common sense” heuristics. Like when someone says “they moved the goal posts.” The role of a beer ad in defining a conundrum of common sense is even tastier (and less filling!)!

Buffett, Greenspan push for new rules – Mar. 13, 2007
But SEC Chairman Christopher Cox said it is difficult to meld both accounting principles and rules.

“This debate about principles versus rules is like ‘Tastes great versus less filling.’ Ideally, you want the best of both,” he said.

The issue here is the melding of a principle of judgment or best information about a company and rules which impose informational discipline (akin to market discipline- it shakes out the chaff and limits the ability of managers to wriggle away form bad news or honest accounting).

Instead of an explanation from the head of the freakin’ SEC as to why this is hard to do, we get the beer metaphor. Does his shoulder shrugging (Gee! I’d like to have my cake and eat it!) make investors feel better?